Tuesday, July 14, 2020

We need to provide revenues now...to solve the problems we know are coming

1 comment:

Adam Eran said...

There's no specific proposal for a solution here. The big solution is for the federal government to embrace its role as a currency creator and spend money for health care, education, climate, etc. There is literally no limit to how many dollars they can spend. Yes, it's theoretically possible for them to spend more than available resources can address, but that's strictly theory. In the history of hyperinflations, it has never happened. In any case, at last look, the economy is only at 77% of capacity. The spending would also employ idle resources, including labor, and would be a net positive, rather than "crowding out" private access to resources.

If you doubt sovereign, fiat money creators like the U.S. can spend without limit, I'd suggest you take a look at the $16 - $29 trillion in credit the Federal Reserve extended to the financial sector in 2007-8. No taxes were raised, no inflation ensued. (The figures are from the Fed's audit)

Taxes do not provision the federal government. They make the money valuable. If you believe the feds need tax dollars to pay for their programs, then please tell me where people get the dollars they use to pay taxes if the government doesn't spend them out into the economy first. Government does not "tax & spend," it spends first, then retrieves some dollars in taxes. What do we call the dollars left out in the economy, not retrieved by taxes? Answer #1: the dollar financial assets of the population (i.e. their savings). Answer #2: National 'debt' -- both answers refer to exactly the same thing, just as your bank account is your asset, but the bank's liability. (this is Modern Monetary Theory, not the product of my fevered imagination). Unfortunately, only the Republicans seem to understand this. Nancy Pelosi wants "PayGo"!

On the state and local level (currency users, like households, not currency creators), the solution is public banks. People erroneously believe banks lend the money on deposit. That is manifestly not so. (look up "Fractional Reserve Lending" if you don't believe me). Public banks could finance economic revivals all over the nation. Currently, we send our money to Wall Street rather than keeping it local. This is especially egregious for infrastructure projects--often half their cost is financing.

So...now you have a solution.

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 3.0 Unported License.